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Kareem, great minds or fools, take your pick. This is the bit that makes no sense to me, or at least the bit that needs a full explanation. Don’t think we’ll get a definitive answer prior to some form of resolution. Gut feel says that cannot be far away, not when we’re still supplying them.
Its why I asked the question last week about if the inventory was trade or retail , I can't quite make 2 and 2 equal 4.
Chris , this is when I start to struggle with what seems logical. The company knew from October / November that the DHSC had an issue with Exsig ( imo their issue , they had seen it in action and ordered it ) . Lets move to Promate ... they developed it so fast , they were telling us about it in November , so I think they were developing it as a separate new product even before DHSC issues started.
It doesnt seem logical to me that G.M would produce more exsig from Nov onwards knowing the DHSC wouldnt take it. Unless tied into manufacturing agreements ???? The DHSC must have taken receipt of the first tranche of exsig or they would not have paid us ( shortfall 23 MM) So If we are correct that the product in question is exsig and winterplex then G.M took the decision to produce prior to signature of ten week trigger , early October ? Now oral contracts can be taken in consideration and it is pure speculation who said what to whom and when. I therefore have no idea about being able to recoup the costs of the products. I do question why if Exsig they cant sell to Unicef at cost even ?. I may be totally wrong about this but normally if you follow logic you reach a reasonable conclusion.
Thanks Chris toffer but I can’t see how that would affect CAB, I could see it reducing profit but the cash at year end must have been in the bank, these seem like P/L adjustments so where did the 15M go.
Apologies if I’m being a bit thick ………
I don't believe the exceptional item would touch cash. It will just be an accounting transaction on the balance sheet for prudence.
If the DHSC would have paid us the £41m from Q1 and £24m from Q4 our cash position would look like £142m. But instead of showing in the bank it is showing in Trade debtors. Scum bags.
Shelldonald, it looks like the H1 exceptional costs of 28.9m and 6.8m have come straight off the cash pile (which is the right place to take them from).
The company have stated they get 43% ebitda from sales and around 80% (its a little moredue to IP tax savings) of that gets converted to cash.
So 53m sales and 23m H1 ebitda would have added around 20m to the 2020 92m cash position. About 112m. Take the 35m exceptional costs off and you get roughly 77m.
Can one of you clever posters explain why the cash dropped from 92M at 2020 year end to 77M at half year 2021 when so much has been sold in the first six months ?
Thanks
SD, the contract is pretty clear on that. There would be no nod and a wink. They had to be instructed in writing (2 weeks in advance IIRC) by the DHSC that the reduced amount of product on the 15th week would be 0.
Very interesting thread guys. All makes sense.
Don’t think this game is anywhere close to over yet.
Thanks Kaeren, So at the end of 2020 the company has built this 10 weeks worth of Exsig/winterplex ahead of the extended period of the contract, which was due to begin on 5th Jan (29th sep + 14 weeks).
If the DHSC didn't give the company due warning that they wanted none of the product beyond 5th Jan, then the company may well be due some recompense under the dispute? In short, there could be more than 40.8m due?
Agree 100% sir......... You have to question why...... I trust the tests..
The Company is also taking an exceptional one-off cost of £28.9m to write down inventory that the Company had built in anticipation of further DHSC demand and to terminate supply commitments with third parties in respect of this supply that are no longer required. This inventory build was Novacyt's direct response to support the UK Government's call for UK manufacturers to build manufacturing capacity and supply chain flexibility in response to the COVID-19 pandemic and was based on likely demand indicated by DHSC. The Company will continue to look for ways to use this inventory.
************************
If we did this on nothing more than a nod and a wink from the DHSC then questions have to be answered by the BOD at the AGM. What was their rationale if they had nothing signed in blood? I suppose the same could be said of a number of diagnostics companies who tooled up for them only to be stonewalled.
It's a pity (and unsurprising) they don't want an in person AGM, they could have easily used some of that vast amount of inventory to test every attendee.
I already said that's my take too.
Troublesome, Cummings gone, handc@ck gone, Bethell gone. Must be getting lonely at the top for Johnson, who does he throw under the bus now?
Christoffer, that would be my interpretation as well. Inventory built up for 1b consisting of exsig and winterplex.
Going back to that RNS on 29th Sep last year,
'Under the terms of the contract, which is in two phases, Primerdesign will supply its products to the DHSC for up to six months. Phase one has an initial fixed term of 14 weeks with the potential to extend supply by a further 10 weeks. This first phase of the contract will involve the immediate deployment of 300 PCR instruments, related kits and support services with a minimum value of £150 million for the first 14 weeks. Based on this initial period, a further £100 million of revenue could be expected for the subsequent 10 weeks, however volumes can be varied up or down subject to certain notice criteria given by the DHSC.'
So the inventory may not even be related to phase 2 (700 additional machines), just the 10 week extension period beyond the initial 14 weeks.
Having read this again, I also agree with you SD, that the inventory must be exsig/winterplex. That has reinforced my confidence that the Q1 invoice should be retrievable.
@sir_digby,
Respect and take a lot of interests in your posts, they're always appreciated.
I notice a lot of posters refer regularly to the DHSC as being villains e.g. ' wouldn't put it past the DHSC to let it slip to the media to poison the well and cover their backs '.
However, is it possible to put names to faces in the DHSC as IMO, all these actions and characteristics bear the hallmarks of the loafer who resides in No 10, Johnson.
Reading the RNS again it states that the inventory build up was a direct response to the government's call for UK manufacturers to build capacity . That doesnt suggest to that it was in anticipation of phase 2.
The amount of inventory suggests it is. If it was built in anticipation of the contract extension and if it is an element of the dispute, they probably wouldn't be allowed to say.
I agree its unlikely to be defect related as A) the dispute would be over by now and B) replacement of the product wouldn't be an option.
In the company's fy update of 29th January they mention having built up significant inventory to meet anticipated demand although an exact figure of 29.9m wasn't given until June 22nd finals. Promate wasn't officially launched until early Feb iirc. IMO this inventory is more likely exsig and or winterplex, if it had been promate I feel we'd have been able to shift a fair bit subsequently without having to write it down.
This could of course be posturing by the company, settle up or we'll pursue you for this as well as they perhaps have a letter of intent or other communication in their back pocket indicating an extension of the contract into the next phase.
Whichever way, 30m of our money gone west.
If there was a material defect with the product supplied I think we'd have known by now because I wouldn't put it past the DHSC to let it slip to the media to poison the well and cover their backs.
P.s Phase 2 was 10 weeks at £10m/week IIRC so £100m of product fits the description.
Hi Digby, no it doesn't because I assumed that the Y/E cash position of c.90m already counted for that.
The 2021 write downs weighed against that figure reinforce my assumption (i.e it more or less all adds up and doesn't have 20m missing).
That 29m of inventory should have a sales value of over £100m. If it were for phase 2 of the contract then is it likely to be PROmate? They would presumably have known by the turn of the year that the NHS only wanted PROmate.
Soder, I had exactly the same thought this morning. Why build up so much specific inventory unless there was a degree of certainty the demand was there. If he's just taken a punt then he needs to be held to account but the company's behavior since the anouncement of the dispute seems contrived to avoid accountability. 30m worth of unusable inventory ffs.
If it's because we were told through the DHSC to anticipate that demand then we should be pursuing them for this on top of the unpaid invoices.
Christoffer, does your cash figure also include the outstanding 20m from Q4 2020?
Hi Soder, I did have that thought on point 2.
The write down for 29m is this year so likely they expected the go ahead after end of Jan. Could this write down be claimed in a settlement that favours NCYT?
Is it a threat/posturing to stand down suppliers just as demand of testing capacity is ramping up again? I still believe he game is very much alive here and things need to be sorted ahead of winter.
…after cooling down a bit the last few days and trying to take a decision on what I personally do from here, one thing is nagging me.
To agree supply contracts and make financial commitments on the scale that was done GM had to be 100% certain of the dhsc phase 2. You dont blow that much and bet the family silver on a likely expectation.
One of the below must hold true:
1. someone at the dhsc has told him it would be extended and to prepare accordingly.
2. The dhsc phase 1 contract had a set termination date by which the dhsc had to notify ncyt if they were not doing phase 2. This passed and GM assumed phase 2 was happening.
3. GM took a gamble and lost. In which case he is guilty of gross negligence and the bird should be looking to claim back compensation payments from him and he should lose any and all benefits he has from his current good leaver status.
Any other possibilities? The last rns refers specifically to working capital write downs and termination cost for product and supply for the dhsc extension which did not happen. What has that got to do with warranty issue?
Nothing makes sense. It’s like they drip information so we forget what the initial stated issue was.